Estimated overhead and direct labor costs for the year were $112,500 and $125,000, respectively. During the year, actual overhead was $107,400 and actual direct labor cost was $120,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include:

Answer

A debit to Cost of Goods Sold for $600.

A credit to Factory Overhead for $600.

A credit to Finished Goods Inventory for $600.

A debit to Goods in Process Inventory for $600.

A credit to Cost of Goods Sold for $600.

Solution Description

Estimated overhead and direct labor costs for the year were $112,500 and $125,000, respectively. During the year, actual overhead was $107,400 and actual direct labor cost was $120,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include: